Renewables firms are laying off staff because the government has shut its grant scheme that helps households adopt green energy technologies such as solar panels. The grant suspension means not a penny has been committed to any household since March 1, leading to accusations that it has made a mockery of the government's green credentials.

The Department of Trade and Industry has tried to support the fledgling renewables industry in recent years with a series of grant schemes designed to make technologies such as solar, wind and ground source heat pumps cheap enough to appeal to domestic users.

But the latest scheme, the Low Carbon Buildings Programme (LCBP), has been dogged by controversy as unreliable funding has made it difficult for firms to plan.

"It's a complete nightmare. I have had to lay four people off and have not had a single order in seven weeks," said Sean Cavendish, head of the Portsmouth-based solar company Sunpowered. "This stop-start is ridiculous and is frustrating for the whole industry."

In response to criticism that the household part of the grant scheme kept running out of money on the first of every month, Gordon Brown put in an extra £6m in last month's budget, adding to the £12m set aside last year to fund the LCBP until mid-2008.

But the energy minister Lord Truscott then called in renewables firms and said the DTI was shutting the grants scheme until some time in May to better assess how to run it. If they grumbled to the press, he said - according to firms at the meeting - the money would not flow for several more months.

"We were getting 20-25 inquiries a week for our systems. Now we are down to three or four. We have not taken any domestic orders for seven weeks," said Jim Kenney, head of installers Chelsfield Solar. Grants on solar systems can be up to 50% of the cost, explaining the sudden drop in demand. "The DTI's petulant child approach is ridiculous. I have all these skilled people and am having to redirect them into non-renewable work to save their jobs," he added.

A DTI spokesman denied that any such threat had been issued by Lord Truscott, adding: "After receiving an extra £6m in the budget we decided on a short suspension of LCBP grants for householders while we looked at ways of improving the allocation process.

"We also wanted to understand why almost £5m of funding was taken up yet the work had not been done. We have been meeting with the industry to examine these issues and hope to announce details of the revamped scheme in the next couple of weeks."

Jeremy Leggett, head of Solarcentury, one of the country's biggest renewable groups, said: "These companies and their customers are simply baffled by the DTI's decision to suspend the programme for seven weeks and counting, despite the welcome announcement of £6m of new funding in the budget. So am I."

Environmental campaigners were also unimpressed. "This is an astonishing way to treat a fledgling industry that could be a core part of a thriving future low carbon economy," said Dave Timms of Friends of the Earth. "The announcement of job losses means the situation has now descended from farce into tragedy. We need to see a quantum leap in the funding for small-scale renewable energy and a regulatory framework which rolls out these technologies nationwide."